In Michigan, 1.8 million low-income people will see their food assistance cut when a temporary boost to the Supplemental Nutrition Assistance Program (or SNAP, formerly known as food stamps) expires Nov. 1, new data from the U.S. Department of Agriculture show.1 SNAP benefits will average less than $1.40 per person per meal after the cut.

The cut will affect more than 47 million Americans, including 22 million children, who receive SNAP, known as the Food Assistance Program in Michigan. For a family of three, that cut will amount to $29 a month. That’s a serious loss given SNAP’s already low benefit levels and the very low incomes of SNAP participants — more than 80% of SNAP households live in poverty.

In Michigan, the benefit cut through October 2014 will total $183 million, slowing economic growth by reducing overall consumption. Nationally, the cut will total roughly $5 billion in federal fiscal year 2014 and an additional $6 billion across fiscal years 2015 and 2016.

Despite continuing high poverty and unemployment, Michigan has cut programs aimed at helping families through hard times. Lifetime limits on cash assistance and an asset test on food assistance have resulted in lower caseloads while a reduction in the Michigan Earned Income Tax Credit means working families are having a more difficult time making ends meet. Michigan also shortened its traditional period of unemployment from 26 weeks to 20 weeks yet the state’s June unemployment rate of 8.7% remains above the national rate of 7.6%. Michigan’s poverty rate of 17.5% is also above the national average.

Benefit Increase Designed to Boost Economy and Ease Hardship

Congress enacted the benefit increase as part of the 2009 Recovery Act to deliver high “bang-for-the-buck” economic stimulus and ease hardship. The Recovery Act boosted SNAP’s maximum monthly benefits by 13.6% beginning in April 2009. It provided that SNAP benefit levels would continue at the new, higher amount until SNAP’s regular annual inflation adjustments to the maximum benefit exceeded the Recovery Act amount. But Congress has since voted to accelerate the sunset of the benefit increase to Oct. 31 of this year.

The scheduled benefit cuts are especially painful in light of the inadequacy of existing benefit levels. In a report issued by the Institute of Medicine and the National Research Council, nutrition experts identified several shortcomings with the current SNAP benefit allotment and recommended evaluating ways of changing the benefit calculation to better ensure that households have enough resources to purchase an adequate diet.2

Benefit Cuts Will Increase Hardship

These cuts will likely cause hardship for many SNAP participants, who will include 22 million children in 2014 (10 million of whom live in “deep poverty,” with family incomes below half the poverty line) and 9 million people who are elderly or have a serious disability. In Michigan, 1.8 million participate in the program — that’s one in six residents.

USDA has found that the Recovery Act’s benefit boost reduced the number of households in which one or more persons had to skip meals or otherwise eat less because they lacked money — what USDA calls “very low food security” — by about 500,000 households in 2009.3 More recent research finds that boosting SNAP benefits during the summer for households with school-aged children who don’t have access to USDA’s summer food program cut very low food security among these households by nearly 20%.4

Given this research and the inadequacy of current benefit levels, we can reasonably assume that a reduction in SNAP benefit levels of this size will significantly increase the number of poor households that have difficulty affording adequate food this fall.

Evidence Doesn’t Support Argument for Cutting SNAP

The Obama Administration and some members of Congress have proposed delaying or cancelling the Nov. 1 cut, but Congress has taken no action on these proposals. Moreover, some in Congress have called for deep cuts in SNAP on top of the scheduled cut. The House of Representatives, which recently defeated legislation that would have cut $20 billion from SNAP — eliminating food assistance for nearly 2 million people — could reconsider these or even deeper cuts in the coming weeks.

Supporters of large SNAP cuts claim that because SNAP enrollment hasn’t declined in tandem with the unemployment rate over the past few years, the program’s enrollment growth in recent years is largely unrelated to the poor economy. In reality, however, the recent reductions in the unemployment rate overstate the improvements in the labor market, as Federal Reserve chair Ben Bernanke has observed.5 The proportion of the adult population with a job — the employment rate — has barely improved since the recession bottomed out.

In addition, the number of unemployed workers not receiving unemployment benefits — the group of the unemployed most likely to qualify for SNAP because they have neither wages nor UI benefits — has continued to grow and is higher now than at the bottom of the recession. Also, the historical record shows that declines in poverty and SNAP enrollment typically lag behind declines in the unemployment rate following recessions.

Endnotes

1 For more detail on the scheduled cut, see Stacy Dean and Dorothy Rosenbaum, “SNAP Benefits Will Be Cut for All Participants in November 2013, Center on Budget and Policy Priorities, Aug. 1, 2013, http://www.cbpp.org/cms/index.cfm?fa=view&id=3899.

A potentially permanent solution to the dissolution of Michigan’s Low Income and Energy Efficiency Fund, or LIEEF, has passed the House and is awaiting concurrence from the Senate, likely next week.

Senate Bill 284 creates a replacement program called the Low-Income Energy Assistance Fund that would operate with funding from a surcharge on residential utility customers’ bills. The surcharge could not exceed $1/month per customer and the amount of monies raised annually under the fund would be capped at $50 million. (more…)

THE BIG PICTURE

The 2014 state budget, as passed recently by the Michigan Legislature, includes some positive investments in Michigan’s future, but also misses the opportunity to improve economic security and health for many Michigan residents. The Legislature completed its work on the $48.7 billion budget in record time, meeting a self-imposed deadline of early June.

The final budget consists of two omnibus budgets, including: (1) the Education Omnibus Budget ($15.4 billion), which funds School Aid ($13.4 billion), community colleges ($336 million), and higher education ($1.4 billion); and (2) the General Omnibus Budget ($33.3 billion), that funds all other state departments and services, including Community Health ($15.4 billion), Human Services ($6 billion), and Transportation ($3.6 billion). Both budgets have been presented to the governor for his signature. In Michigan, the governor also has the power to make line item vetoes.

Sadly, in formulating the state budget for next year, state lawmakers turned their backs on more than $1.5 billion in 100% federal funding available to expand Medicaid eligibility to very low-income parents and childless adults up to 133% of the federal poverty level.

This expansion would reduce the number of uninsured adults by 46%, and result in savings in the state’s General Fund of $206 million in Fiscal Year 2014 alone by allowing the state to use federal funds to provide comprehensive services to a population that is currently eligible for very limited state funded health benefits. Cumulative savings to the state’s General Fund would grow to $1.2 billion through 2020.

It is not too late, however, to accept the federal funds available to Michigan to expand Medicaid eligibility, and legislative discussions continue. House Republicans proposed legislation, H.B. 4714, that initially would have partially expanded Medicaid eligibility to nondisabled adults (ages 21-65) and imposed a 48-month time limit.

Now redrafted, the bill modifies the 48-month time limit, and instead requires those with incomes between 100% and 133% of poverty who are eligible under the expansion to purchase private insurance through the healthcare marketplace, or increase cost sharing or out-of-pocket expenses after 48 months. Some relief may be available if enrollees adopt healthy behaviors or assist the state in detecting medical fraud and abuse.

The final Fiscal Year 2014 budget also included unexpected funds based on more favorable revenue projections adopted at the May 15th Revenue Estimating Conference. The new revenue consensus by state fiscal experts assumes that Michigan will have an additional $702 million in fiscal years 2013 and 2014, including $579 million in state General Funds, and $123 million in the School Aid Fund.

With these unexpected revenues, along with the potential infusion of federal Medicaid funds, the Michigan Legislature had the opportunity to build a 2014 budget that begins to reverse some of the damaging policy decisions made during the worst of the Great Recession to balance the budget and provide business tax cuts. With this budget, lawmakers had the opportunity to reinvest in the educational and human services that have been shown to improve economic competitiveness.

While some progress was made, including a significant expansion in funding for Michigan’s state-funded preschool program, an expansion of dental care to low-income children, and a small restoration of K-12 per-pupil allocations, the opportunity was largely missed to reverse tax and policy changes that disproportionately hurt low- and moderate-income working families, children and seniors.

THE FY 2014 BUDGET: HOW IT AFFECTS LOW-INCOME MICHIGAN RESIDENTS

Michigan tax policies hurt working families and thwart economic growth: Because Michigan’s Constitution requires that the state budget be balanced each year, tax policy decisions drive budget decision-making. In the long run, Michigan will not be able to consistently make the types of investments needed to create a competitive workforce and build the community infrastructure, services and amenities needed to attract and retain businesses until it updates its outdated tax system to ensure sufficient revenues in good economic times and bad.

The tax changes adopted in the last several years have unfortunately moved Michigan in the wrong direction by making the state’s tax system more regressive and creating additional barriers to employment for low-wage workers. More significantly, by relieving businesses of the obligation to pay their fair share for the community services they rely on, recent tax changes further jeopardized the basic public services needed to grow Michigan’s economy, including basic human services, K-12 education, access to higher education and vital community services.

In 2011, the Michigan Legislature adopted an unprecedented tax shift that reduced taxes on businesses by 83%, while increasing taxes on individuals by 23%. As part of that shift:

Tax credits for many low- or moderate-income workers and families were cut or eliminated.

Michigan’s Earned Income Tax Credit, an effective anti-poverty tool that helps hard-working families whose incomes put them and their children below or moderately above the federal poverty line was cut by 70%.

The Homestead Property Tax Credit was restricted for some low-income families and reduced for others.

The child deduction of $600 per child for children ages 18 and under was eliminated.

Credits for city income taxes and college tuition and fees were eliminated.

Tax credits for many charitable contributions were eliminated, including contributions to:

Michigan college foundations, universities, public broadcast stations, and public libraries and state museums.

Homeless shelters, food banks and community foundation.

Medical savings accounts.

Individual or Family Development Accounts.

Taxes on pensioners were increased.

The full impact of the 2011 tax changes on individual taxpayers and low-income workers and their families is just being felt this year, as taxes for 2012 are completed.

EITC payments, which totaled $353.5 million statewide before the Great Tax Shift, are expected to fall to $106 million for the 2012 tax year. As a result, an additional 9,000 children are expected to fall into poverty, as their parents lose the struggle to cover work-related costs and make ends meet.

Donations to community foundations are down 28% statewide, with the Community Foundation for Southeast Michigan experiencing a 40% drop in donations to endowments for the 185 nonprofits they partner with.

In the face of rising poverty and restricted access to basic public income and food assistance, donations to homeless shelters and food banks are falling. For example, the Food Bank Council of Michigan reports that donations of $200 to food banks have dropped by 29%, while $400 donations have fallen by 47%.

During the debates over the Fiscal Year 2014 budget, lawmakers had an opportunity to reverse some of the 2011 tax changes that hurt low- and moderate-income workers, seniors and charitable organizations. Despite unexpected revenues of more than $700 million, and a transfer of funds into the state’s “rainy day” fund, the Legislature failed to do so.

The Fiscal Year 2014 budget fails to compensate for years of disinvestment in basic public services. While the Fiscal Year 2014 budget includes some increases for state programs and services, it fails to compensate for more than a decade of cuts and the erosion of purchasing power. Michigan’s economic problems began before the national Great Recession, and deepened dramatically during that period. Recent projections show that Michigan’s economy is inching forward, but it would be an exaggeration to say it is rebounding, and many Michigan families are grappling with higher taxes, fewer services, and lower incomes.

The rationale for the Great Tax Shift of 2011 was that the combination of reducing business taxes and increasing individual income taxes—with a net loss of revenue—would improve the state’s economy and spur job growth. The evidence doesn’t support that policy goal. Research shows that corporate income tax cuts are unlikely to have a strong positive effect on a state’s rate of economic growth or create many new jobs.

In fact, raising taxes on the working poor creates a clear drag on the state’s economy, in part because lower-income people spend nearly all the money they make, mainly on necessities, so for every dollar they lose due to a tax increase, total spending drops by around a dollar. Further, tax changes and cuts in public services that reduce available income and supports for working families and increase poverty have a negative effect on children’s health, school achievement, and ultimately their success in the workforce.

Over the last decade, Michigan’s outdated tax structure failed to produce the revenues needed to maintain basic services and invest in the human and other capital needed to grow the state’s economy. While total state spending (state General Fund and state restricted funds) rose by 7% between 2003 and 2013, with the exception of the Departments of Community Health and Corrections, every other major state department and service suffered cuts—even before calculating the impact of a 21% increase in the Detroit Consumer Price Index over that decade.

Instead of fixing the state’s revenue problems, lawmakers chose to make deep cuts in programs for low-income and working families, public schools, institutions of higher learning, and vital community services. To ensure Michigan’s competitive advantage, it is critical that the state begin to reverse those failing policies and reinvest in its most precious resource, its human capital. While much has been said about Michigan as a “comeback” state, the truth is that tax and budget decisions have forced hard-working, low-income families in Michigan to make sacrifices, and closed them off from the benefits of the “comeback.”

THE FY 2014 BUDGET: SEVERAL STEPS FORWARD, BUT MORE SLIDING BACK

Economic Security and Work:

More very poor children will be denied access to basic income assistance. The Fiscal Year 2014 budget reduces funding for Family Independence Program by $41 million to a total of $214.3 million to reflect continued reduction in caseloads—projecting caseloads will fall from 53,298 in the current year (appropriated) to 45,710 in Fiscal Year 2014—a 14% reduction.

FIP caseloads have been declining dramatically in recent years, in large part the result of policy decisions, including the adoption in 2011 of changes in lifetime limits for assistance. Between 2010 and the projections for 2014, caseloads will have fallen from 79,233 to 45,710—a drop of 42% in just five fiscal years.

Approximately seven of every 10 FIP recipients are children, and 60% of those children are under the age of 9.

To be eligible for FIP, the average family of three must have an annual income of less than $9,800, and the maximum benefit is $492 per month, representing less than one-third of the poverty line.

Approximately 30,000 very poor children will have their fall clothing allowance restored. The Michigan Legislature included $2.9 million in the Fiscal Year 2014 budget to restore the clothing allowance provided to children in child-only FIP families in the 2013-14 school year. The Snyder Administration chose to eliminate the clothing allowance this fall—the only direct client benefit cut as a result of federal sequestration.

30,000 children will have their clothing allowance restored in school year 2013-14, but because of earlier policy changes limiting the benefit to FIP cases that do not include adults, 120,000 children who had previously received a fall clothing allowance will still be left behind.

The fall clothing allowance is an important support for low-income children, particularly in light of the failure to raise FIP grants.

The number of Michigan residents with access to basic food assistance will continue to decline: The final budget reduces funding for the Food Assistance program (formerly called the Food Stamp program) by $683.7 million in recognition of the loss of temporary federal funds, as well as caseload reductions—largely based on changes in FAP eligibility, including the adoption of an asset test. The Legislature assumes that caseloads will fall from 1.1 million cases appropriated this year, to 876,650 in 2014—a 19.4% reduction. The actual average monthly FAP caseload through April of this year was much lower than appropriated at 912,339.

Between 2004 and 2011, FAP caseloads grew by 135%. In 2011, Michigan adopted an asset limit for FAP, limiting access to food assistance and creating an unreasonable hardship for some families, as well as turning away federal funds available to assist low-income families. Since that time, FAP caseloads have been declining.

Over 70% of FAP recipients receive no other state cash assistance, and the average monthly benefit for a two-person household is $267.

Low-income working families will continue to struggle after losing significant income with the 70% cut in the state’s Earned Income Tax Credit: In 2011,the Michigan Legislature slashed the state Earned Income Tax Credit from 20% of the federal EITC to just 6%. The state EITC is a refundable tax credit for working families, designed to promote and reward work and offset other taxes paid by low wage workers that consume a higher percentage of their total income. Despite unexpected new state revenues, the Legislature did not recommend EITC restorations.

The EITC is a proven tool in the fight against poverty. Last year, at 20% of the federal credit, the state EITC kept 14,000 children from falling into poverty. This year, at just 6%, only 5,000 children will escape poverty, leaving another 9,000 behind.

The EITC serves as a temporary income supplement for most families—three out of five use the credit for just 1 or 2 years while they get back on their feet.

The credit has been shown to increase employment, reduce the need for public assistance, boost local economies, and benefit businesses by helping low-wage workers cover work-related costs such as transportation and child care.

Healthy Workers, Families and Children:

Thousands of currently uninsured Michigan residents may not have access to healthcare that is fully federally funded: The Legislature rejected, as part of the budget process, the governor’s recommendation to accept Michigan’s share of federal funds to expand healthcare coverage to 320,000 low-income parents and individuals through the Medicaid programs. A separate bill to expand eligibility for Medicaid is currently under discussion.

More than 1.9 million Michigan residents (19.4%) now rely on Medicaid for their basic health services.

Because Medicaid expansion would be 100% federally funded, it would result in savings to the state of more than $200 million in Fiscal Year 2014 alone, allowing the state to use federal funds to provide comprehensive services to a very low-income population that is currently eligible for very limited state funded health benefits.

The Legislature’s decision to date denies coverage for uninsured Michigan residents for both Medicaid health and mental health services. Michigan’s mental health system is underfunded, and without this expansion more people will be forced to go without needed services, be added to waiting lists for services, or receive services through the corrections system. Funding for community mental health services for persons not eligible for Medicaid was reduced by nearly $54 million between fiscal years 2010 and 2012.

By giving more women access to healthcare before and between pregnancies, Medicaid expansion would improve both the preconception health of mothers and birth outcomes, including a reduction in infant deaths. Approximately 60% of women eligible for Medicaid deliveries report that their pregnancies are unintended, compared with 27% of privately insured women.

Medicaid expansion could increase economic activity and decrease the state’s long-term healthcare liabilities—with federal funds covering 100% of the costs through 2016, phasing down to 90% in 2020 and beyond.

The Department of Community Health estimates that Medicaid expansion would cut Michigan’s uncompensated care costs—caused by those who must turn to emergency rooms for their care — by $320 million through 2022.

Approximately 70,500 more low-income Michigan children will have access to dental care: The Legislature ultimately approved the governor’s proposal to add $11.6 million to expand the Healthy Kids Dental program to cover an additional 70,500 children in three Michigan counties—part of a multi-year plan to cover all children in the state.

Approximately 70,500 children in Ingham, Ottawa and Washtenaw counties will have access to preventive oral health care.

Currently, more than 440,000 children are covered by the program in 75 of Michigan’s 83 counties. Many of the state’s most populated areas are not yet covered, including Oakland, Macomb, and Wayne counties—with a disproportionate impact on children of color.

Access to preventive dental care reduces dental emergencies and related costs. Children enrolled in Healthy Kids Dental are 60% more likely to receive preventive dental care by age 3, and 25% less likely to have dental emergencies.

Michigan infants, and particularly infants of color, will continue to die unnecessarily: While the Michigan Legislature adopted—at a reduced level of $2 million—the governor’s recommendation for new funding to begin to implement Michigan’s infant mortality reduction plan, this increase is more than offset by lawmakers’ current decision to reject Medicaid expansion to uninsured Michigan residents, including women whose infants would be born healthier if adequate preconception care was available.

Despite being a key indicator on the governor’s dashboard, Michigan’s infant mortality rates continue to be higher than most states. Michigan ranks 37th among the states in infant mortality, with death rates for African American infants that are more than two-and-one-half times higher than white babies.

Additional funding will be available to prevent toxic lead poisoning: The final budget includes $1.25 million in state General Funds to remove lead hazards from homes in areas with high incidences of lead-poisoned children—funding that was not included in the governor’s budget. Last year, the Michigan Legislature approved an additional $2 million for Michigan’s lead abatement program, known as Healthy Homes, for total funding of $4.9 million. The governor vetoed the expansion, and the program is funded at $2.9 million this year.

Lead has a particularly devastating effect on young children when it can compromise the developing central nervous system and cause irreversible damage to cognitive capacity and behavior.

Of the nearly 69,000 children targeted for lead poisoning testing (who are insured by Medicaid or live in one of 14 targeted communities), 57% were tested in 2012. Testing for lead poisoning peaked in 2010, and has decreased slightly since. Nearly 150,000 children under the age of 6 were tested in 2012.

Prevention works. While, the number of children with confirmed elevated lead blood levels has declined dramatically, some areas of the state still have very high rates of lead poisoning. The city of Detroit had over half the state’s lead poisoning cases in 2012; the second highest total was in Grand Rapids.

A Top-Notch Cradle to Career Education:

More low-income 4-year-olds will benefit from early childhood education: The final Fiscal Year 2014 budget includes the governor’s proposal to increase funding for Michigan’s Great Start Readiness Program by $65 million, but reserved $25 million of the increase in a newly created GSRP reserve fund which could only be tapped through legislative action if there is sufficient need for the preschool slots. Total funding for the state-funded preschool program is increased from $109.3 million in the current year to $174.3 million in Fiscal Year 2014, opening up approximately 16,000 new half-day slots for 4-year-olds.

The Legislature made several changes to GSRP policy, including: (1) raising the payment for a half-day slot from $3,400 to $3,625; (2) eliminating the current competitive GSRP program that provides funds to private sector providers, instead requiring Intermediate School Districts to establish a local process to contract out at least 30% of their slots to public or nonprofit community organizations or for profit businesses; (3) targeting GSRP funds to the lowest income children by lowering the income cap, requiring that at least 90% of children served are from families with incomes below 250% of poverty and the lowest income children are served first; (4) requiring GSRP providers to have quality ratings of at least three out of five start through Great Start to Quality, Michigan’s quality rating system; and (5) requiring GSRP providers to use a sliding fee tuition scale for children who do not meet the income eligibility requirements.

Evaluations of the GSRP show that participants are more likely to be ready when they enter kindergarten and pass 4th grade MEAP tests. In addition, fewer GSRP participants were retained in grade and more graduated on time from high school.

A growing number of economists and business leaders, including heads of Fortune 500 companies, the Federal Reserve Bank, and Nobel Prize-winning economists agree that early childhood programs can generate government savings and produce returns that exceed public investments, with savings accruing from lower costs related to such public services as special and remedial education, high school graduation rates, lower unemployment, higher earnings, and reductions in the need for public assistance.

Michigan public schools will continue to struggle to balance their budgets: Although the Legislature, in contrast to the governor, included a partial restoration of the per-pupil foundation allowance for public schools, the increase was not enough to make up for the cuts already suffered by school districts. The Legislature increased the maximum (basic) foundation allowance by $30 to $8,049, and the minimum foundation by $60 to $7,026. The final budget also includes $6 million to ensure that all districts receive a minimum increase of $5 per pupil.

The Legislature also approved $36 million (up from the governor’s recommendation of $24 million) for equity payments to districts with foundation allowances of less than $7,076. The payment would be the lesser of $50 per pupil or the difference between the district’s Fiscal Year 2014 foundation allowance and $7,076.

The final budget retains funding for best practices grants at the current year level of $80 million, with districts eligible for $52 per pupil if they meet seven out of eight best practices. The governor recommended that best practices grants be reduced by 70% to $25 million. Lawmakers also increased performance funding for districts from $30 million to $46.4 million, to reflect the number of districts that are expected to be eligible next year.

In 2011 and 2012, Michigan public schools suffered total cuts of $470 per pupil in their foundation allowances, and this budget fails to offset those cuts.

In the decade between fiscal years 2004 and 2014, total state spending through the School Aid Fund increased approximately 4%, while the Detroit Consumer Price Index increased nearly 21%.

Lawmakers once again chose to transfer funds from the School Aid Fund, which has traditionally been used to fund K-12 education, to universities and community colleges. A total of approximately $400 million will be transferred in Fiscal Year 2014. Transferred School Aid Fund dollars now account for almost 60% of total funding for Michigan’s communities colleges, and 15% of university funding.

Many low-income youths and adults will not be able to afford a college education—the ticket to long-term economic security: Lawmakers included an increase of 7% (from $43.8 million to $47 million) in the Fiscal Year 2014 budget for the state’s Tuition Incentive Program, which provides financial aid to students who are Medicaid-eligible. While sorely needed, this relatively small increase is unlikely to substantially change Michigan’s ranking of 40th in the country in needs-based grants, or its placement last in the Midwest.

Over the last 10 years, states across the country increased investments in need-based grants by an average of 84%. Michigan, running counter to the national trend, decreased state funding by 20%—one of only two Midwest states to cut needs-based grant funding during that period.

In 2010-11, Michigan invested the least in grant dollars per student of all Midwestern states. The state spent 4.5% of its higher education budget on state grants in that year, while Pennsylvania, Indiana and Illinois all spent higher than the national average of 12.5%.

In 2010-11, only 14% of Michigan’s full-time students received some kind of grant aid, ranking the state second to lowest in the Midwest and 40th in the nation in the number of students receiving aid.

Without incentives for universities and community colleges to focus on the success of low-income and nontraditional students, many will continue to find barriers to the completion of postsecondary education: For Fiscal Year 2014, the Michigan Legislature again failed to incorporate performance standards that reward universities and community colleges for helping at-risk students. The final budget includes a 2% increase for both universities ($24.9 million) and community colleges ($5.8 million), with funding allocated based on performance metrics. In the current year budget, lawmakers included additional funding for universities and community colleges that meet specific performance standards, however only one of those performance standards—tuition restraint—addresses the unique needs of low-income and nontraditional students, including those needing remediation.

For Fiscal Year 2014, the performance measures for universities will remain largely the same, including tuition restraint; degree completions overall, as well as in key areas such as science, technology, engineering, mathematics and health; six-year graduation rates; research and development expenditures; and institutional support as a percentage of core expenditures. In the final budget however, the Legislature strengthened incentives for tuition restraint by making it a condition for receiving any performance funding and by lowering the tuition increase limit from 4% to 3.75%.

For community colleges, the metrics are also largely unchanged, and include degree completions, student contact hours, and administrative costs as a portion of total spending. For Fiscal Year 2014, lawmakers rejected a new metric proposed by the governor for job placements in the skilled trades.

Michigan’s economic growth depends on a skilled workforce, and the performance funding system put in place this year for public universities and community colleges does not adequately focus on the success of low-income students or those needing remediation.

The most recent data available show that 36.5% of community college students and 13% of university students in Michigan were enrolled in at least one developmental education course—at a cost to both the students and the institution.

Michigan’s decision to appropriate a portion of its higher education and community college funding using performance metrics provides an opportunity to address student success in the budget process and reward institutions that are successful in helping low-income and nontraditional students.

Low-income students or those needing remediation face more barriers to educational access and success, are more expensive to serve, and more likely to drop out. If there are no financial incentives for institutions to devote additional resources to this population, they could be viewed as a liability in terms of the other standards, including graduation rates.

Before leaving town for the annual Mackinac Policy Conference and fudge fest last week, state lawmakers finished their work on the FY 2014 state budget, making decisions on the allocation of approximately $48 billion in state and federal revenues at nearly breakneck speed.

So how did low- and moderate-income families and children, the unemployed, seniors and other vulnerable residents of Michigan fare in this fast-track budget? On the positive side, the Michigan Legislature adopted several of the governor’s initiatives that serve to improve children’s health and school readiness. (more…)

On Tuesday, May 28, the joint House/Senate Conference Committee for the Department of Human Services approved its Fiscal Year 2014 budget for the DHS. The DHS conference report was subsequently approved by the full House of Representatives as part of HB 4328, an omnibus bill that includes the budgets for all state departments and services except higher education, community colleges and K-12 School Aid. A vote by the full Senate is expected in the coming week. Agreements reached by the joint House/Senate conference committees can be either approved or rejected by the full House and Senate, but cannot be amended on the floor.

After years of declining investments in human services, the final DHS budget agreement cuts spending by 10.2%, or $685.7 million. The deep cuts in DHS public assistance programs have largely been the result of recent policy decisions that limit eligibility, including a new asset test for food assistance, and more stringent enforcement of lifetime limits on income assistance—both adopted in 2011.

What is most unacceptable about the cuts in public assistance is that they come at a time when poverty is increasing, and unemployment—while dropping from peak levels—remains high. Further, many of the jobs that are being found are low wage, making it increasingly difficult for workers to support their families.

Exacerbating the problem have been recent tax policy changes that have increased taxes for low-income working families, further whittling away their wages. In 2011, Michigan lawmakers approved a major overhaul of Michigan’s tax system that cut business taxes by $1.8 billion, financed through tax increases on moderate- and low-income workers, as well as pensioners.

As part of that tax shift, lawmakers reduced the state’s Earned Income Tax Credit by 70%—from 20% of the federal credit to just 6%. The EITC is a proven tool for keeping children and families out of poverty and has been shown to increase employment and reduce the need for public assistance. It is estimated that a 20% credit kept 14,000 children out of poverty in Michigan. At 6%, an estimated 5,000 children will be kept out of poverty, leaving another 9,000 children behind.

BACKGROUND ON THE DHS BUDGET

The DHS budget is the third largest in Michigan, accounting for 13.5% of total spending from federal and state sources this year. The DHS administers a range of public assistance, child welfare and adult services at a cost of approximately $6.7 billion in the current fiscal year. Included in the DHS budget are funds for the Family Independence Program; the Food Assistance Program; State Disability Assistance; State Emergency Relief; and child protective, foster care, adoption and juvenile justice services.

TOTAL FUNDING

Governor: The governor’s proposed DHS budget included a 9.8% cut in total spending, for a reduction of over $658.3 million. State General Funds dropped by $15.7 million or 1.5% in the Governor’s budget.

Conference: The Conference Committee reduced the DHS budget by 10.2%, from $6.7 billion in the current fiscal year to $6.02 billion—a reduction of $685.7 million.

THE FOOD ASSISTANCE PROGRAM

FAP (formerly called the Food Stamp program) is completely federally funded, with an average monthly benefit for a two-person household of $267. Over 70% of FAP recipients receive no other state cash assistance. With increasing unemployment and need between fiscal years 2004 and 2011, caseloads grew by 135%. Since that time, in part due to state policy changes limiting eligibility, caseloads have begun to drop.

Key among those changes was the adoption in 2011 of a limit on FAP assets. Families must now have less than $5,000 in total assets, including the value of vehicles after certain exclusions, in order to receive food assistance. This asset limit resulted in less access to assistance for low-income families and individuals, and caused the state to turn away federal funds available to assist low-income families.

Governor: The governor’s budget reduced funding for FAP by $683.7 million in recognition of the loss of federal funds from the American Reinvestment and Recovery Act as well as caseload reductions. The governor’s budget assumed that FAP caseloads would fall from 1.1 million cases appropriated this year, to 876,650 in Fiscal Year 2014—a 19.4% reduction. The actual average monthly FAP caseload through April of this year is much lower than appropriated at 912,339.

FAMILY INDEPENDENCE PROGRAM:

FIP provides cash assistance to low-income households with dependent children. To be eligible for FIP, an average family of three must have an annual income of less than $9,800, and financial assets of less than $3,000. The maximum benefit for a family of three is $492 per month. Approximately seven of every 10 FIP recipients are children, and 60% of those children are under the age of 9. FIP caseloads have been declining dramatically in recent years, in large part the result of policy decisions, including the adoption in 2011 of changes in lifetime limits for assistance. Total FIP spending is estimated to be $255.3 million in the current fiscal year.

As part of federal sequestration, the Administration chose to eliminate the annual clothing allowance for approximately 30,000 children receiving FIP in cases that do not include an eligible adult—the only direct client grant reduction. Since 1999, Michigan has provided at least some children receiving FIP an annual clothing allowance—in recognition of the reality that the failure to raise public assistance grants has reduced their value to less than one-third of the federal poverty threshold. At its peak, more than 150,000 children were provided a back-to-school clothing allowance. In 2011, the program was restricted to children in FIP cases that do not include an adult, leaving behind more than 120,000 children.

Governor: The governor’s budget reduced funding for FIP by $15.8 million to a total of $239.4 million to reflect continued reductions in caseloads. The governor projects FIP caseloads will fall from 53,298 in the current year to 49,226 in Fiscal Year 2014—a reduction of 7.6%.

Conference: The Conference Committee:

Reduced expected cases and funding for FIP based on May caseload estimates. The Conference Committee projects that there will be a total of 45,710 FIP cases in FY 2014.4 The DHS reports that the average monthly caseload for the FIP program fell from 83,507 in Fiscal Year 2011 to 55,971 in April of this year.5

Provided $2.9 million to restore the clothing allowance in the 2013-2014 school year, retaining the restriction that only children in FIP cases without an eligible adult can receive the assistance.

Did not fund a new substance abuse screening and testing pilot for FIP applicants and recipients in at least three counties, as proposed in HB 4118.

STATE DISABILITY ASSISTANCE

The SDA, which is a state-funded program, provides cash assistance to disabled adults who have annual incomes below $5,400. The payment level for a single adult is $269 monthly. With the adoption of the Conference Committee report, funding for SDA will be down 39% since 2010.

Governor: The governor recommended a decrease of $546,600 (all State General Funds) to reflect an anticipated drop in the number of SDA cases from 8,777 this year to 8,600 if 2014—a reduction of 2%.

Conference: The Conference Committee further reduced expected SDA cases to 7,777 based on the May Revenue Estimating Conference consensus caseloads—a reduction of 11% below the current fiscal year, and 9.6% below the governor’s recommended caseload.

STATE EMERGENCY RELIEF AND LOW-INCOME ENERGY ASSISTANCE

DHS assists low-income individuals and families facing emergencies that threaten health and safety. Through a combination of direct financial assistance and contracts with a network of nonprofit organizations such as the Salvation Army and local Community Action organizations, low-income households can receive assistance with emergency housing, utility shut-offs, home repairs, relocation assistance and burials.

For energy services, families must have incomes below 150% of the federal poverty level; for non-energy services, a family of three must have an income of $625 per month or less. Families with cash assets over $50 must pay toward the emergency, and the value of non-cash assets cannot exceed $3,000 for a family of two or more.

Governor: The governor included a total of $235 million in federal and state restricted funds, including $175 million in federal Low-Income Home Energy Assistance Program funds, and $60 million in new state restricted funds for a Low-income Energy Assistance Fund—in response to a new state law (P.A. 615 of 2012) requiring DHS to establish a new consolidated energy assistance program with a single, simplified application. Revenues for the Low-income Energy Assistance Fund would be collected through the Department of Licensing and Regulatory Affairs and administered by DHS.

Conference: The Conference Committee agreed with the governor and provided $60 million in restricted funds for energy assistance.

CHILD WELFARE SERVICES

A range of child and family services programs are funded through the DHS, including protective services to investigate charges of child maltreatment; foster care services to supervise and place children who cannot remain safely in their homes because of child abuse and neglect; adoption subsidies, including financial and medical subsidies to families who adopt children with special needs; and family preservation and prevention services. In addition, DHS works in partnership with counties to fund services for delinquent and maltreated children and youths through the Child Care Fund.

While funding for some child welfare services has increased in recent years as a result of litigation against the state for its failures in meeting the needs of abused and neglected children, funding for services to prevent maltreatment, and to strengthen and reunify families, continues to be woefully inadequate.

FOSTER CARE SERVICES

Governor: The governor’s budget included $190.8 million for foster care payments, a cut of $15 million (7.3%). The current year budget includes $205.8 million for foster care payments, with a caseload of 7,200. The governor projected that the Fiscal Year 2014 caseload would be 6,650.

Conference: The Conference Committee included $181.1 million for foster care payments, a reduction of 12% over the current year, and 5% below the governor’s recommendation for Fiscal Year 2014. The Conference Committee projects that foster care caseloads will fall to 6,250. The Committee also increased foster care administrative rates for private child placing agencies by $3 to a total of $40 per child per day.

ADOPTION SUBSIDIES

Governor: The governor projected that adoption subsidy caseloads would increase slightly from 26,850 to 27,100 monthly, an increase of approximately 1%.

Conference: The Conference Committee assumes an adoption subsidy caseload of 27,150 in Fiscal Year 2014. The Committee also included $28 million for a $3 per child per day rate increase for all adoption subsidy cases. The current year budget had included funding for a $3 per day increase only for current foster care parents and new adoption subsidy cases. As a result of a legal opinion that DHS could not exclude current adoption subsidy cases from the increase, the higher rate was implemented in October of 2012 for all adoption subsidy cases, resulting in a budget shortfall of approximately $28 million. The Conference Committee rejected $2 million previously added by the Senate to allow adoptive parents to claim an additional subsidy if they discover that their adopted child has additional special needs after the adoption is finalized.

CHILD WELFARE STAFFING ENHANCEMENTS

Governor: The governor’s budget included funding to continue to expand the number of child welfare workers in order to comply with a settlement agreement resulting from a lawsuit by Children’s Rights, Inc., a national advocacy organization. The lawsuit claimed that DHS was unable to move children quickly into safe, stable and permanent homes, provide children with adequate services, provide safe and stable foster homes, or prepare children who “age out” of the child welfare system. To address the settlement, in May of 2012, the governor requested a total of 577 new workers for the current fiscal year (FY 2013). The governor’s Fiscal Year 2014 budget revises the total number of child welfare enhancement staff needed to 496 (a cut of 81 FTEs), the majority of which are protective services workers. Overall, the governor’s budget includes funding for a total of 3,940 child welfare workers statewide.

Conference: The Conference Committee cut the number of new child welfare workers by an additional 80 positions, for a total cut of 161. This was substantially less than the cuts previously passed by the House, which cut an additional 151 positions above the governor’s recommendation, and the Senate, which reduced child welfare staffing by an additional 223 positions.

CHILD CARE FUND

Governor: Based on current spending trends, the governor’s budget provided $177.5 million for the county Child Care Fund, a reduction of $11.1 million or 6% from current year expenditures of $188.7 million. The Child Care Fund provides for the care and treatment of delinquent or maltreated children who are court wards and not eligible for federal payments through Title IV-E. The primary sources of funding for the Child Care Fund are state General Funds and federal TANF.

Conference: Based on the May 15th consensus agreement, the Conference Committee provided $171 million for the Child Care Fund. Included in the Conference Committee budget is $5.1 million for an increase of $3 per child per day for private child placing agencies, as well as a cut of $11 million as a result of DHS audits of Child Care Fund claims made by counties to identify improper claims. The Senate also added $1.5 million for counties to expand their in-home, community-based juvenile justice programs.

PREVENTION SERVICES

Governor: The governor provided largely continuation funding for Families First ($18.0 million), Strong Families/Safe Children ($12.4 million), Child Protection and Permanency ($16.8 million), and the Family Reunification Program ($4 million). The governor also allocated $2.5 million in one-time funding to expand the Families Together Building Solutions program to Macomb and Muskegon counties, and to expand the Supportive Visitation/Home-Based Parent Education program to additional counties.

Conference: The Conference Committee:

Rejected the governor’s $2.5 million expansion in one-time family preservation funding.

Further reduced funding for family preservation programs by $4.2 million, including cuts in Families First, Child Protection and Permanency, and family reunification.

Cut funding contracts for runaway youth services by 10% in order to partially offset costs related to the adoption subsidy shortfall.

Provided $2.5 million in federal funds for pilot programs in Kalamazoo, Macomb and Muskegon counties to prevent children from birth through age 5 from entering foster care.

ENDNOTES

1. The Child Development and Care program is now funded through the Michigan Department of Education budget.2. The Medicaid program is funded through the Department of Community Health budget.3. The total unduplicated count takes into account individuals that receive more than one public benefit (e.g., are eligible both for the Family Independence program and Medicaid).4. Summary of FY 2013, 2014, 2015 Consensus Agreement – May 10, 2013, Department of Human Services – Major Spending and Caseload Programs, Fiscal Year 2014, State Budget Office (total FIP caseloads includes Extended FIP benefits and Short Term Family Support).5. Total Cases, Recipients and Payments for FIP, FAP, SDA, CDC and SER Benefits Trend Information, Fiscal Years 2011, 2012 and 2013, Green Book Report of Key Program Statistics, Michigan Department of Human Services. Fiscal Year 2013 is an average monthly year-to-date through April of 2013.

THE BIG PICTURE

The Fiscal Year 2014 state budget has been moving quickly through the Legislature, with both the governor and the Legislature expressing a desire to complete work by the beginning of June.

The House of Representatives has passed all of its budgets for Fiscal Year 2014 through two omnibus budgets, including: (1) the Education Omnibus Budget ($15 billion), which funds School Aid ($13.2 billion), community colleges ($334.9 million), and higher education ($1.4 billion); and (2) the General Omnibus Budget ($33.9 billion), that funds all other state departments and services, including community health ($15.3 billion), human services ($5.9 billion), and transportation ($3.4 billion).

The Senate has also approved most of its budget bills in preparation for the joint House/Senate conference committees that will iron out differences between the two versions–utilizing the budget targets adopted based on projected revenues from the May Revenue Estimating Conference.

This aggressive timetable is being challenged by a number of major budget issues driving the debate, including:

Medicaid Expansion: The governor’s budget included 100% federal funds—available through the Affordable Care Act–to support the expansion of Medicaid coverage to very low-income parents and childless adults up to 133% of the federal poverty level. This expansion would increase the number of Michigan residents covered by Medicaid from approximately 1.8 million to 2.2 million, reducing the number of uninsured adults by 46%.

Medicaid expansion would result in savings in the state’s General Fund of $206 million in Fiscal Year 2014 alone by allowing the state to use federal funds to provide comprehensive services to a population that is currently eligible for very limited state-funded health benefits. Savings to the state’s General Fund would grow to $1.2 billion through 2020.

The governor recommended that half of the savings in state funding be deposited in a newly created healthcare savings fund to offset any future costs related to Medicaid expansion. The remaining funds were to be used to fund vital services, or expansions, including the Healthy Kids Dental program.

To date, the Legislature has not endorsed the expansion of Medicaid, resulting in pressures throughout the state budget, and threatening the opportunity for healthcare coverage for hundreds of thousands of very low-income Michigan residents. House Republicans recently released HB 4714, a bill to expand Medicaid to 133% of poverty, but under onerous conditions, most notably a 48-month limit on Medicaid benefits for nondisabled adults (ages 21-65), as well as a requirement that recipients contribute up to 5% of annual income on copays, premiums and deductibles. The bill could not be implemented without a federal waiver that provides 100% federal funding for current and newly eligible nondisabled adults, as well as administrative costs. The bill also ends the Medicaid expansion when it is no longer 100% covered by federal dollars, which under the Affordable Care Act is scheduled to occur in 2017.

Transportation Funding: The Fiscal Year 2014 budget debates are also being shaped by the governor’s proposal to increase funding for Michigan roads and transportation infrastructure by $1.2 billion. The governor proposed to fund the road improvements by taxing gasoline at the wholesale level, increasing vehicle registration fees, and local taxing options.

While there is general agreement that Michigan’s roads and bridges are in serious disrepair and new investments are needed, consensus on how to pay the bill has yet to be achieved. Legislative options have included increases in the general sales tax—an option that could affect other vital state services, including human services and schools.

Michigan Tax Changes and Expected Revenues: In 2011, the Michigan Legislature adopted a major “tax shift” that reduced taxes on businesses by 83%, while increasing taxes on individuals by 23%. As part of that shift, Michigan’s Earned Income Tax Credit, an effective anti-poverty tool that helps hardworking families whose incomes put them and their children below or moderately above the federal poverty line, was cut by 70%. EITC payments in 2011 statewide were $353.5 million; for the 2012 tax year, they are expected to fall to $106 million.

The new revenue consensus by state fiscal experts is that Michigan will have an additional $702 million in combined revenues above earlier estimates for fiscal years 2013 and 2014—including a total of $579 million in state General Funds, and $123 million in the School Aid Fund. While encouraging, these increases follow years of steep revenue declines and related budget cuts, many of which disproportionately hurt low- and moderate-income working families, children and seniors.

In Fiscal Year 2014, the Legislature has an opportunity to use the potential infusion of federal Medicaid funds and unexpected state revenues to begin to reverse some of the policy decisions made to balance the budget and provide business tax cuts, as well as to invest in the educational and human services that have been shown to improve economic competitiveness.

FISCAL YEAR 2014 BUDGET ISSUES AFFECTING LOW-INCOME RESIDENTS

Among the major issues affecting low-income Michigan residents in the proposed Fiscal Year 2014 budgets being considered by the Legislature are the following:

Access to health and mental health care: As a result of the failure to date to expand Medicaid, both the House and Senate budgets restrict access to vital health and mental health services.

Hundreds of thousands of currently uninsured Michigan residents will not have access to medical and mental healthcare that is fully federally funded. In addition to the budget hole of more than $200 million created by the Legislature’s failure to accept federal funds to expand Medicaid, the decision affects the state’s residents and communities in a number of ways:

At least 320,000 currently uninsured Michigan residents would be unable to receive coverage for both Medicaid healthcare and mental health services. More than 1.8 million Michigan residents (19.4%) now rely on Medicaid for their basic health services. Further, the share of Michigan births covered by Medicaid has been growing—from 35% in 2003 to 51% in 2010.

By giving more women access to healthcare before and between pregnancies, Medicaid expansion would improve the preconception health of mothers and birth outcomes, including a reduction in infant deaths.

Expanded access to Medicaid family planning services could also mean significant cost savings for the state. Approximately 60% of women eligible for Medicaid deliveries report that their pregnancies are unintended, compared with 27% of privately insured women.

The Department of Community Health estimates that Medicaid expansion would cut Michigan’s uncompensated care costs–caused by those who must turn to emergency rooms for their care—by a total of $320 million through 2022.

More than 70,500 children will not have access to dental care. The governor proposed to add $11.6 million in state General Funds to expand the Healthy Kids Dental program to cover an additional 70,500 children in three Michigan counties—part of a multi-year plan to cover all children in the state. The House rejected the governor’s plan. The Senate agreed with the governor, but did not specify which counties would become part of the program in the upcoming fiscal year. A failure to move forward with the governor’s plan to expand the Healthy Kids Dental program statewide could have the following consequences:

Approximately 70,500 children in Ingham, Ottawa and Washtenaw counties would not have access to preventive oral health care.

The governor’s plan to expand the Healthy Kids Dental program to the estimated 720,000 children not currently covered would be derailed. Currently, more than 440,000 children are covered by the program in 75 of Michigan’s 83 counties. Many of the state’s most urban areas are not yet covered, including Oakland, Macomb, Washtenaw and Wayne counties—with a disproportionate impact on children of color.

Continued dental emergencies and related costs are likely. Children enrolled in Healthy Kids Dental are 60% more likely to receive preventive dental care by age 3, and 25% less likely to have dental emergencies.

Michigan infants, and particularly infants of color, will continue to die unnecessarily. For Fiscal Year 2014, the governor recommended $2.5 million to begin to implement Michigan’s infant mortality reduction plan. The House rejected the governor’s proposal, while the Senate included a placeholder for further discussion in conference committee. Without additional funding:

Michigan will be less able to move ahead with its plan to reduce infant mortality, particularly for African American infants who are much more likely to die in the first year of life, including regional perinatal care, initiatives to reduce medically unnecessary deliveries before 39 weeks, the promotion of safe sleep practices for infants, and expanded home visiting programs.

Michigan’s infant mortality rates will continue to be higher than most states. Michigan ranks 37th among the states in infant mortality, with rates for African American infants that are more than two-and-one-half times higher than white babies.

Many children will continue to be exposed to toxic lead poisoning. Last year, the Michigan Legislature approved an additional $2 million for Michigan’s lead abatement program, known as Healthy Homes, for total funding of $4.9 million. The governor vetoed the expansion, and the program is funded at $2.9 million this year. For Fiscal Year 2014, the governor maintains funding at $2.9 million. The House added $1 million for total funding of $3.9 million next year, while the Senate included a placeholder to ensure discussion at the joint House/Senate Conference Committee.

Lead has a particularly devastating effect on young children when it can compromise the developing central nervous system and cause irreversible damage to cognitive capacity and behavior.

Of the nearly 69,000 children targeted for lead poisoning testing (who are insured by Medicaid or live in one of 14 targeted communities), 57% were tested in 2012. Testing for lead poisoning peaked in 2010, and has decreased slightly since. Nearly 150,000 children under the age of six were tested in 2012.

Prevention works. While, the number of children with confirmed elevated lead blood levels has declined dramatically, some areas of the state still have very high rates of lead poisoning. The city of Detroit had over half the state’s lead poisoning cases in 2012. The second highest total was in Grand Rapids.

Public assistance for low-income families, children and adults: The governor, House and Senate have recommended cuts in funding for the Department of Social Services of approximately 10-11% in Fiscal Year 2014, with most of the decline coming from continued steep drops in caseloads for basic assistance programs such as the Family Independence Program, FIP, and the Food Assistance Program , known as FAP. These caseload declines reflect policy changes over the last several years that have restricted eligibility for basic assistance programs.

More very poor children will be denied access to basic income assistance. The governor reduced funding for FIP by $15.8 million to a total of $239.4 million to reflect continued reduction in caseloads—projecting caseloads will fall from 53,298 in the current year to 49,226 in Fiscal Year 2014—a 7.6% reduction. Both the House and the Senate agreed with the governor’s caseload projections.

FIP caseloads have been declining dramatically in recent years, in large part the result of policy decisions, including the adoption in 2011 of changes in lifetime limits for assistance. Between 2010 and the projections for 2014, caseloads will have fallen from 79,233 to 49,226—a drop of 38% in just five fiscal years.

Approximately seven of every 10 FIP recipients are children, and 60% of those children are under the age of 9.

To be eligible for FIP, the average family of three must have an annual income of less than $9,800, and the maximum benefit is $492 per month.

The number of Michigan residents with access to basic food assistance will continue to decline. The governor reduced funding for the Food Assistance program (formerly called the Food Stamp program) by $683.7 million in recognition of the loss of temporary federal funds, as well as caseload reductions—largely based on changes in FAP eligibility, including the adoption of an asset test. The governor assumes that caseloads will fall from 1.1 million cases appropriated this year, to 876,650 in 2014—a 19.4% reduction. The actual average monthly FAP caseload through March of this year was much lower than appropriated at 912,755. The House and Senate agreed with the governor’s caseload recommendations.

Between 2004 and 2011, FAP caseloads grew by 135%. In 2011, Michigan adopted an asset limit for families receiving assistance, limiting access to food assistance for families, and turning away federal funds available to assist low-income families. Since that time, FAP caseloads have declined slightly.

Over 70% of FAP recipients receive no other state cash assistance, and the average monthly benefit for a two-person household is $267.

Low-income working families will continue to struggle after losing significant income with the 70% cut in the state’s Earned Income Tax Credit. In 2011, the Michigan Legislature slashed the state Earned Income Tax Credit from 20% of the federal EITC to just 6%. The state EITC is a refundable tax credit for working families, designed to promote and reward work and offset other taxes paid by low wage workers that consume a higher percentage of their total income. The governor, House and Senate have not recommended EITC restorations.

The EITC is a proven tool in the fight against poverty. Last year, at 20% of the federal credit, the state EITC kept 14,000 children from falling into poverty. This year, at just 6%, only 5,000 children will escape poverty, leaving another 9,000 behind.

The EITC serves as a temporary income supplement for most families—three out of five use the credit for just 1 or 2 years while they get back on their feet.

The credit has been shown to increase employment, reduce the need for public assistance, boost local economies, and benefit businesses by helping low-wage workers cover work-related costs such as transportation and child care.

Adequate funding for a top-notch cradle to career educational system:

More low-income 4-year-olds will benefit from early childhood education. The governor increased funding for the Great Start Readiness Program by $65 million, from $109.3 million in the current year to $174.3 million in Fiscal Year 2014, while indicating his intention to expand the program by another $65 million in Fiscal Year 2015. The governor’s proposal would open up approximately 16,000 new half-day slots for 4-year-olds, requiring that at least 90% of the children live in families with incomes below 300% of poverty (up from 75% this year). The governor also increased the preschool slot payment from $3,400 to $3,624.

The House provided only $38 million for the GSRP, increasing the per-slot amount to $3,500. The House requires that at least 80% of children served by GSRP live in families with incomes at 200% of poverty or less. The Senate agreed with the governor on the funding increase ($65 million), but maintained the per-slot amount at $3,400. The Senate would require that all children served live in families with incomes at or below 300% of poverty, with the poorest children being enrolled first.

Evaluations of the GSRP show that participants are more likely to be ready when they enter kindergarten and pass 4th grade MEAP tests. In addition, fewer GSRP participants are retained in grade and more graduate on time from high school.

A growing number of economists and business leaders, including heads of Fortune 500 companies, the Federal Reserve Bank, and Nobel Prize-winning economists agree that early childhood programs can generate government savings and produce returns that exceed public investments, with savings accruing from lower costs related to such public services as special and remedial education, high school graduation rates, lower unemployment, higher earnings and reductions in the need for public assistance.

An increase in the per-slot payment for GSRP is a priority. The GSRP per-slot payment has not been increased since 2007, when it was raised by only $100. As a result, districts have been forced to subsidize their preschool programs even as overall district funds become increasingly tight. GSRP per-student funding has steadily lost ground to inflation over the past 10 years, and even the governor’s proposed increase to $3,625 per half-day slot only makes up for a small part of this decline in real funding. The result is less access to services and challenges in maintaining program quality, which is the key to school readiness.

Michigan public schools will continue to struggle to balance their budgets. The governor’s budget did not include an across-the-board increase in the per-pupil allowance received by public schools. The governor instead recommended $24 million for equity payments of up to $34 per pupil to further close the foundation funding gap between districts by raising the per-pupil payments for the lowest funded districts receiving the minimum grant from $6,966 to $7,000 per-pupil. However, the governor reduced funding for “best practices” grants by 70% (from $80 million to $25 million), and kept performance funding for districts at the current year level of $30 million.

The House also did not fund an across-the-board increase in the per-pupil allotment for schools, but provided total funding of $36 million to bring the equity payment up to $50 per pupil for districts with foundation allowances below $7,016. The House did not fund best practices grants, but included a placeholder to further discuss them in conference committee.

The Senate included $24 million for a $9 increase in the basic foundation allowance for schools, as well as an $18 per pupil in the minimum foundation allowance. The Senate did not include the equity payments, and eliminated funding ($80 million) for `best practices payments.

In school year 2012-13, Michigan public schools suffered a cut of $470 per pupil in their foundation allowances, and this budget fails to offset those cuts.

School districts not eligible for the equity payments could actually suffer additional cuts in their overall per-pupil allotments if they are affected by cuts in best practices grants.

As tuition skyrockets at public four-year universities, fewer people will be able to afford a college education. The governor’s budget provided $1.24 billion for university operations, including $24.9 million in new funding (a 2% increase) that would be allocated based on six performance metrics: undergraduate completions in critical skills (science, technology, engineering, mathematics and health); research expenditures; six-year graduation rates; total completions; administrative costs as a percentage of core expenditures; and tuition restraint.

The House and Senate appropriated the same level of overall funding as the governor, but the House made tuition restraint a prerequisite for receiving performance funding, lowering the tuition threshold from 4% to 3%. The Senate also made tuition restraint a prerequisite for receiving performance funding, but retained the governor’s 4% tuition restraint threshold.

At most Michigan public universities, tuition for four years of college has more than doubled in the past 10 years; students graduating in 2013 will pay more than twice the amount paid by students who graduated in 2003.

The 2% increase for performance funding is below the current year increase of 3%.

Low-income adults will struggle most, as needs-based financial aid becomes more scarce. In 2009, the Michigan Legislature eliminated five needs-based grants for students, and the governor, House and Senate again failed to restore those grants in their Fiscal Year 2014 budgets. The governor provided continuation funding for two of the remaining grant programs, including: (1) $31.7 million in federal TANF funding for the Michigan Tuition Grant, a needs-based grant; and (2) $18.4 million in TANF for the Michigan Competitive Scholarship, a merit-based scholarship with eligibility based on ACT scores. Under the governor’s budget, private colleges with students receiving Michigan Tuition grants would be required to participate in the state’s P-20 longitudinal data system, and report on the number of Tuition and Pell Grant students graduating, as well as the number taking remedial education classes.

In his Fiscal Year 2014 budget proposal, the governor increased funding for the Tuition Incentive Program by $3.2 million (7%) in state General Funds, adding to current spending of $43.8 million in federal TANF to bring total funding to $47 million. The TIP is available to students who are eligible for Medicaid, and the governor’s budget limits reimbursements to universities under the TIP to 300% of the average community college tuition rate.

The House agreed with the governor on funding levels, as well as the governor’s TIP policy changes, but did not require private colleges to participate in the P-20 data system.

The Senate also agreed with the governor on funding levels, but did not include the governor’s TIP policy changes or the Michigan Tuition Grant language requiring P-20 data system participation for private colleges.

Student loans often make up a large part of a student’s financial aid package, but the rising costs of tuition and high interest rates make it imperative that grant aid be available as well. Federal aid programs such as Pell Grants do not cover a large enough portion of costs by themselves to keep postsecondary education a?ordable for low-income students, so all states have state-funded programs that allocate some grants on the basis of income as opposed to merit or other factors.

Over the last 10 years, states across the country increased investments in need-based grants by an average of 84%. Michigan, running counter to the national trend, decreased state funding by 20%–one of only two Midwest states to cut needs-based grant funding during that period.

In 2010-11, Michigan invested the least in grant dollars per student of all Midwestern states. Michigan spent 4.6% of its higher education budget on state grants in that year, while Pennsylvania, Indiana and Illinois all spent higher than the national average of 12.5%.

In 2010-2011, only 14% of Michigan’s full-time students received some kind of grant aid, ranking the state second to lowest in the Midwest, and 40th in the nation.

On March 20, the House Appropriations Subcommittee for the Department of Community Health approved its version of the Fiscal Year 2014 budget. Overall, the Subcommittee did not support programs recommended by the governor to improve the health status of Michigan residents. Of critical importance, the Subcommittee did not support the governor’s recommendation to accept federal funds to expand eligibility for the Medicaid program.

The Subcommittee also did not support expanded funding for key initiatives recommended by the governor including the Healthy Kids Dental program, infant mortality reduction initiatives, mental health and substance abuse service improvements for veterans, mental health innovation grants for high risk children and youths, or Health and Wellness initiatives. Subcommittee initiatives included in the budget are increased funding for the Nurse Family Partnership and pregnancy and parenting support projects.

The House Subcommittee’s budget includes $15.3 billion in total funding for the Department of Community Health in Fiscal Year 2014, a 2% increase over current year funding, but 8% below the Governor’s recommended budget for Fiscal Year 2014.

Included in the House Subcommittee budget are the following:

MEDICAID

Medicaid expansion:

Governor: The governor’s budget includes 100% federal funds to support the expansion of Medicaid coverage to very low-income parents and childless adults up to 133% of the federal poverty level. This influx of federal revenue would increase total Medicaid funding to $12.3 billion, and result in savings in the state’s General Fund of $206 million by allowing the state to use federal funds to provide comprehensive services to a population that is currently eligible for very limited state funded health benefits. The governor recommended that half of the savings in state funding ($103 million) be deposited in a newly created healthcare savings fund, with the remainder used to expand the Healthy Kids Dental program and other state services.

The expansion would increase the number of Michigan residents covered by Medicaid from approximately 1.8 million to 2.2 million, reducing the number of uninsured adults by 46%.

House Subcommittee: The Subcommittee rejected the governor’s recommendation to accept Michigan’s share of federal funds to expand healthcare coverage to 320,000 low-income parents and individuals through the Medicaid program, likely forcing many to remain uninsured, reducing access to primary care, and increasing costs through emergency room care.

Healthy Kids Dental:

Governor: The governor included $11.6 million ($3.9 million in state General Funds) to expand the Healthy Kids Dental program to 70,500 children in three counties: Ingham, Ottawa and Washtenaw. With this expansion, 50% of eligible children statewide would be covered in Fiscal Year 2014, and the governor indicated his intention to expand the program to an additional 100,000 children in Fiscal Year 2015.

House Subcommittee: The Subcommittee rejected the governor’s recommendation.

Graduate medical education:

Governor: The governor’s budget cut the one-time funding for the Graduate Medical Education program by $4.3 million. These funds are used by teaching hospitals to offset the costs of operating medical residency programs for physicians, and to provide care to uninsured and other vulnerable populations in hospitals and clinics.

House Subcommittee: The Subcommittee reduced funding for Graduate Medical Education by a $2.7 million, leaving $1.7 million in one-time funds.

MENTAL HEALTH SERVICES

Medicaid expansion:

Governor: The Medicaid expansion endorsed by the governor in his Fiscal Year 2014 budget would include comprehensive mental health services.

House Subcommittee: By rejecting the Medicaid expansion, the Subcommittee’s budget denies comprehensive mental health services to an estimated 320,000 Michigan residents, forcing them to go without needed services, be added to a waiting list for services, or receive services through the corrections system.

Mental health innovations:

Governor: The governor included $5 million in one-time General Fund dollars for mental health innovations, including: (1) comprehensive home-based mental health services for children to reduce child hospitalizations and strengthen families ($2.5 million); (2) a pilot program to address the needs of youths with complex behavior disorders ($1 million); and (3) mental health “first aid” training for a range of public and private groups, including law enforcement officers, to ensure that they can identify mental health problems ($1.5 million).

House Subcommittee: The Subcommittee rejected the governor’s recommendation.

Mental health services for special populations:

Governor: The governor reduced funding for mental health services for special populations from $8.8 million to $5.8 million, a cut of 34%. Included in the cuts are the Hispanic/Latino Commission, ACCESS, Arab/Chaldean services, the Chaldean Chamber Foundation, and the Michigan Jewish Federation.

House Subcommittee: The Subcommittee concurred with the governor.

Jail diversion initiative:

Governor: The governor redirected $1.6 million in state funds currently used by psychiatric hospitals to a new jail diversion initiative that will enhance current diversion efforts for individuals with mental illness, emotional disturbances, or developmental disabilities within five Michigan communities.

House Subcommittee: The Subcommittee concurred with the governor’s recommendation, adding language that gives priority to county sheriffs and community courts, specifying the St. Joseph County Sheriff and the 36th District Court community court project.

Mental health and substance abuse services for veterans:

Governor: The governor recommended $60,000 to improve mental health and substance abuse services for veterans and their families, including training and credentialing for community mental health and substance abuse programs, co-location with services provided through the Veterans Health Administration, and training for law enforcement officers in recognizing post-traumatic stress disorders.

House Subcommittee: The House Subcommittee rejected the governor’s proposal.

Services for persons with chronic mental health conditions:

Governor: The governor included $900,000 for three “behavioral health home” demonstration projects for Medicaid recipients with chronic mental health conditions. The model coordinates physical and mental health care, including comprehensive case management, family education and service referrals. The demonstration projects would be located in the Washtenaw area (Washtenaw, Livingston, Lenawee and Monroe counties), Northern Michigan (21 counties), and either Saginaw County or the Genesee region.

House Subcommittee: The Subcommittee concurred with the governor’s recommendation.

HEALTH CARE SERVICES DELIVERY INNOVATION GRANTS

Governor: The governor recommended $3 million for competitive grants to address emerging healthcare and service delivery system issues and needs, encourage innovation in service delivery, and build partnerships between the public and private sectors.

House Subcommittee: The Subcommittee rejected the governor’s recommendation.

PUBLIC HEALTH SERVICES

Local public health services:

Governor: The governor recommended no changes in funding for local public health essential services, which are funded at $37.4 million in the current fiscal year.

House Subcommittee: The Subcommittee included current funding of $37.4 million, but added a $100 placeholder to ensure a point of difference for later legislative debates, indicating an interest in a possible restoration of funding for local public health departments.

Health and Wellness Initiative:

Governor: The governor’s budget removed $5 million in one-time state funding available in the current year for Health and Wellness initiatives, and then increased ongoing funding by $1.5 million, bringing total funding to $8.7 million–a net reduction of $3.5 million or 29%. The largest cuts in the governor’s budget include the elimination of funding for cancer prevention and control ($862,500), an 87% cut ($750,000) in the pregnancy prevention program, and a 44% cut in both the 4×4 wellness program ($1 million) and cardiovascular health programs ($317,500). Also reduced are the diabetes and kidney programs, health disparities, the Michigan Care Improvement Immunization Registry, the Michigan Model for school health, and smoking prevention programs.

House Subcommittee: The Subcommittee concurred with the reduction of the one-time funding of $5 million, but rejected the additional $1.5 million in ongoing funding, resulting in total recommended funding of $7.2 million, or a reduction of 41% in the Health and Wellness Initiative. The Subcommittee eliminated funding for the 4×4 wellness program, and took additional cuts in cardiovascular health and smoking prevention programs.

Infant mortality reduction:

Governor: The governor included $2.5 million in state funds to implement recommendations in the Infant Mortality Reduction Plan, including regional perinatal care, initiatives to reduce medically unnecessary deliveries before 39 weeks, the promotion of safe sleep practices for infants, and expanded home visiting programs. Medicaid currently pays for 51% of all Michigan births, and Michigan ranked 36th in the country in infant deaths in 2012, with infant deaths rates that are three times higher for African American babies.

House Subcommittee: The Subcommittee rejected the governor’s recommendation.

Home visitation programs:

Governor: The governor’s budget did not include new funding for home visitation or parent support programs. During last year’s budget cycle, the Legislature approved $2 million for a home visitation and support program that promotes childbirth and adoption, as well as an additional $1 million for the Nurse Family Partnership program. The governor vetoed both budget increases.

House Subcommittee: The Subcommittee included $350,000 in state funds for the Nurse Family Partnership program, a 4% increase, as well as $700,000 for a new pregnancy and parenting support pilot project. Budget language indicates that the Nurse Family Partnership funding is to be used to improve training and support for nursing teams, recruit families in high-need communities, and plan and market a program in Detroit. The goals of the pregnancy and parenting support pilot are to promote childbirth choice, educate parents about adoption options, improve parenting skills, and provide abstinence education. Counseling, support and referral services would be available to women during pregnancy through 12 months after birth.

With the release of the governor’s budget earlier this month, lawmakers are tackling what is arguably their most important work—deciding how to carve up the state’s resources to fund important state services such as income supports for low-income children; child abuse and neglect prevention; early childhood, K-12 and higher education; and police and fire protection.

Never has there been a stronger need for Michigan residents to have their voices heard as the state budget is set. (more…)

The governor’s fiscal year 2014 budget was released today to a room full of lawmakers, lobbyists and other Lansing insiders. Gov. Snyder’s budget includes commendable investments in Michigan’s future workforce and economy, including an expansion of the Medicaid program to very low-income parents and childless adults, dental services for an additional 70,500 low-income children and new investments in early childhood education.

The governor’s proposed investments are an important down payment, but without repair of our antiquated revenue system, they fall short of meeting the need, and in many cases do not restore many of the deep cuts made in critical programs for low-income residents and families over the last decade.

Most notably, the budget fails to address basic income assistance programs at a time when one-third of working families do not earn enough to meet basic needs. The best tool for helping the working poor, the Michigan Earned Income Tax Credit, was cut by the Legislature by 70%, and families will begin to feel the impact during this tax season. (more…)

Though many controversial bills are being pushed through the Legislature during this lame-duck session, one bill that has not gotten much attention is SB1386 which would codify the current DHS policy implementing the 60-month lifetime limit on the Family Independence Program.

The Michigan League for Public Policy testified in opposition to SB1386, but the bill has since been passed out of the Senate and is on its way to the House. The bill is in direct conflict with the legislation passed in 2011 that, while tightening the exemptions to the 48-month time limit of the Family Independence Program, still preserved cash assistance for families caring for a disabled child or spouse. (more…)